AARP: Older Unemployed Americans Get Double Whammy

Older Americans who are unemployed before they retire get a double whammy: besides losing their job, their Social Security payments during retirement will drop.

That's because Social Security is based on a worker's highest earnings and indexed for wage growth. And most people earn the most in their last year of their careers.

"Those years are vital to their Social Security benefits," Gary Koenig, director of economic security for AARP's Public Policy Institute, tells CNNMoney. "It's something you'll have to deal with your entire life."

For workers earning $1,262 a month, missing a year of earnings would cause their Social Security payments to drop 3 percent or about $450 a year, AARP calculates.
In addition, many are compelled to begin collecting Social Security early to make ends meet — which decreases monthly benefit checks even more.

Older workers have more difficulty finding new jobs. About 44 percent of workers in their 50s who were laid off in the recession were still unemployed a year later, Richard Johnson, director of the Urban Institute's Program on Retirement Policy, tells CNNMoney. And two-thirds of those who were 62 were still unemployed.

Over 41 percent of workers take Social Security benefits as soon as they're eligible, reports USA Today. Half of those 65 or older rely on Social Security for at least half of their family income.

Delaying benefits increases payments about 8 percent a year until you're 70, when the benefit maxes out. Financial planners generally recommend delaying benefits until you're 70, or at least until you are 66.

"Most people take it at 62," says Jack Tatar, author of books on saving for retirement, according to USA Today. "They end up losing in the long run. If they delay it till 70, they will get 30 percent more. Unfortunately, most Americans can't do that."